The conservatives were right to dub Gordon Brown's Pre-Budget Report a 'Post-Budget Report' - post-Budget 2000, that is, rather than pre-Budget 2001 (as New Labour likes to call these things.) Last March the Chancellor had no intention of making concessions to pensioners. He was aware of the pensioners' history, Lady Barbara Castle and Jack Jones, but dismissive of it.

The trick he missed at the time was to emphasise that it was because of the Government's success in controlling inflation that the adjustment for prices was only 75p. But the mere fact that the rise was so low would in any case have drawn attention to how low the basic state pension is - at the lower end of the cost of dinner for Tony Blair and Gordon Brown at Islington's Granita restaurant.

The Chancellor's new 'pensioners' package' is a recognition of political reality - of the fact that the pensioners' lobby gathered strength during the spring and summer, turning up in force at the Labour Conference. The 'short-termism' of boasting that he is 'giving away' more than would be required by indexing pensions to earnings is pretty barefaced. There is no long-term commitment to indexing pensions to earnings, except for those qualifying for the minimum income guarantee and 'low- and modest-income pensioners'. Qualifying requires filling in vast forms, whose complexity has been known to defeat doctors of philosophy.

When Brown came to office, he promised the biggest welfare reforms since Beveridge and the 1945-50 inception of the welfare state under the Attlee government. The whole idea of the welfare state was that it offered decent state provision when necessary 'from cradle to grave'. It was a system of national insurance under which people paid their contributions and got their legitimate reward in time of sickness and in old age.

Despite the electoral goodies being offered to pensioners in the Pre-Budget Report - and the money is certainly a lot more generous than originally envis aged - New Labour has now basically accepted the Conservative plan to erode the value of the state pension over time and make private pensions a necessary precaution of old age.

There is no doubting Brown's good intentions, nor his and his strategists' desire to do as much as they can within the narrow confines of what they think their focus groups will permit, to 'redistribute' income and heal the poor. But it is interesting that it took a pensioners' revolt to push them this far, and the fact is that after all these years, there is a lot of ground to make up. Nevertheless, all pensioners do well in the short term, and the Conservative plan to remove their perks is just bad politics.

Which brings us to the other revolt, that of the fuel protesters. Despite the scorn that has been poured on the Chancellor from all sides, it is pretty obvious that in the world of practical politics he had little alternative but to demonstrate that, while not being prepared to cave in completely to their demands, he had to show he was listening. What happened during the protesters' first revolt gave the Government a bigger fright than it was ever prepared to admit. Ironically, it had been on to the general movement for some time; indeed the last Budget demonstrated that it knew the point of resistance to fuel taxes had been reached. It was the degree of resistance that took Ministers unawares. So more concessions had to be made.

Chancellors are sometimes credited with inventing new taxes; to judge from the reactions, Brown has almost been credited with inventing a new fuel. Few people seemed even to have heard of 'low-sulphur petrol' on 'Budget day'. Now, no doubt in return for a distinct absence of a windfall levy on their profits, the oil companies will be serving it to all and sundry by Easter.

Contrary to what some sceptics have claimed, there is indeed an environmental aspect to the fiscal incentive to shift to low-sulphur fuels. Scientific research indicates that sulphurous emissions can damage your health and your forests. On the other hand there appears to be precious little connection with that great concern of our time, global warming. This is not a Budget to eliminate or even reduce floods.

The pensioners' package and the relief for road hauliers were the main constituents of what it is fair to describe as a 'mini-Budget'. When Brown came to office he tended to deride the old-fashioned practice of 'mini-Budgets'; but he has deemed it judicious, rightly in my view, to bow to 'events, dear boy, events'.

But this is not a mini-Budget in the old sense of being introduced in an economic emergency to boost or rein back demand and economic activity. It is a mini-Budget because of a political emergency. The cost of the pensions and road haulage packages is put at £4 billion a year; but it so happens that because of the buoyancy of the economy, income and other tax receipts are running at over £4bn a year more than expected at the time of the March Budget. There is very little change in fiscal balance.

This is in accord with the Chancellor's philosophy, which is to leave economic management almost entirely to the Bank of England, once he has set out his spending priorities. These have been simple: to freeze and save in the early years of his chancellorship - to gain a reputation for fiscal prudence; and to increase public spending more rapidly than gross domestic product during the second phase - to do something about the nation's obvious discontents.

Time and time again the Chancellor has emphasised that he has a 'golden rule' for the nation's finances. To quote the Pre-Budget Report: 'The Government will borrow only to invest and not fund current spending.' Many observers are under the impression that he aims to balance the current Budget over the economic cycle. But he goes further than that. The report states that 'it [the golden rule] is met when, over the economic cycle, the current budget is in balance or surplus '.

Contrary to the popular impression, he cannot 'spend' much of any surplus at a time of near full employment without prompting the Bank of England's monetary policy committee to raise interest rates to keep the economy in balance. There was careful consideration between Treasury and Bank before the Pre-Budget Report was launched, and the committee made its no-change decision on interest rates last week.

But over the next few years the current surplus is forecast to halve from 1.5 per cent of GDP this financial year to 0.7 per cent in 2004-05, while the overall finances move from a surplus of 0.8 per cent of GDP in 2000-01 to a deficit of 1.1 per cent in 2004-05 (as measured by what the Treasury calls cyclically adjusted public-sector net borrowing). This reflects the fact that public spending is due to rise at some 3.5 per cent a year, against an estimated 2.5 per cent average growth rate for the economy as a whole.

The Chancellor's report takes pride in the state of the finances, buoyancy of the economy, approach to full employment and low level of inflation. But it reflects a continuing concern with the UK's low levels of productivity, and once again many of the proposed micro tax measures are aimed one way or another at improving productivity.

Beneath the upbeat pre-election tone of much of the presentation lie other sources of unease. The report notes that 'business investment has decelerated significantly since early 1999' - from 7.5 per cent growth to a mere 1.75 per cent this year.

This reflects 'weaker output growth and declining profitability'. It says firms 'have responded to sterling's overall strength by cutting export prices significantly'. Even so there has been a loss of market share.

What prevented the overvaluation of the pound from having a much greater impact than it has had so far was a dramatic doubling in the rate of the world trade growth between 1999 and this year, to 11 per cent. Our export markets are estimated to have grown at 9.25 per cent, but exports at only 8 per cent, while 'import penetration has risen significantly'. The Pre-Budget Report forecasts, on present trends, a rising trade deficit in goods and services, reaching a cumulative £112 bn. over the five years 1999-2003 inclusive.

It is difficult to see how a trade deficit of this magnitude can be sustained indefinitely, but this will be a problem for the next parliament. The Chancellor has done everything he can to make sure he personally inherits that crisis.